Judge rules claims not sufficiently alike for class action
Wells Fargo will not face a class-action lawsuit over allegations that it systematically discriminated against Black and Hispanic mortgage applicants, according to a decision by US District Judge James Donato on Tuesday. The ruling, issued in San Francisco, concluded that the plaintiffs failed to demonstrate that their claims were similar enough to proceed as a group. Instead, they must pursue individual lawsuits.
“Plaintiffs wish to sue about hundreds of thousands of home loan decisions at once,” Donato wrote. “Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question[:] why was I denied.”
The decision spares Wells Fargo—a major US mortgage lender and the fourth-largest bank in the US—from the possibility of a multibillion-dollar payout, Reuters reported.
Allegations of 'digital redlining' and biased algorithms
The plaintiffs, represented by civil rights attorney Ben Crump and several law firms, alleged that Wells Fargo engaged in “digital redlining.” The bank reportedly used an automated underwriting system, CORE (Common Opportunities Results Experiences), which they claimed featured “race-infected lending algorithms” that rated minority applicants as higher-risk borrowers.
According to the lawsuit filed in the US District Court for the Northern District of California, the result was disproportionately high denial rates for mortgage and refinancing applications from Black and Hispanic applicants, even when they were similarly qualified as white applicants.
In 2020, Wells Fargo approved 67.1% of white mortgage applicants but only 51.8% of Black applicants, according to a statement released by Ben Crump. That same year, Black borrowers paid an average interest rate of 3.34%, compared to 3.23% for white borrowers.
“Home ownership is the heart of the American Dream, and Wells Fargo has pushed that dream out of reach for thousands of Black Americans with their blatantly discriminatory loan practices,” Crump stated.
“Wells Fargo systematically denied Black Americans mortgages, charged them higher interest rates, refused to invest in Black neighborhoods and denied Black Americans the benefits the federal government intended for all Americans to weather the pandemic.”
Donato’s ruling came two months after the Federal Reserve lifted a seven-year-old asset cap placed on Wells Fargo following a series of scandals involving customer treatment. The Fed cited improvements in the bank’s risk management and governance.
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